Scandal hurts Penn State as a school and a brand

PHILADELPHIA (AP) - November 20, 2011

Part of the immediate fallout from the still-developing investigation is economic: Sales of hats, shirts, and other items emblazoned with the Penn State name have plummeted about 40 percent overall compared with the same period last year, according to retailers and industry analysts.

"This is the first time I can recall ever seeing a decline of sales right out of the box," said Matt Powell, an analyst with industry research organization SportsOneSource Group. "I have never seen anything this before.

"But we've never seen a scandal quite like this before."

Former football defensive coordinator Jerry Sandusky stands accused of sexually abusing eight boys, some on campus, over 15 years, allegations that were not brought to the attention of law enforcement even though authorities say high-level people at Penn State apparently knew about them.

College-branded merchandise accounts for more than $4 billion in annual retail sales, and Penn State typically ranks in the top 10 in sales, capturing roughly $80 million annually, Powell said.

"They probably made about $3 million last year from sales of royalty products," he said. "This is a very unusual situation, and my gut tells me it's not going away, at least in the short term."

For the week after the scandal broke, Penn State's slice of the market share was about 1.93 percent. During the same week last year, that figure stood at 2.67 percent, Powell said.

If consumers continue to express their displeasure with their wallets, it could spell huge financial losses to add to Penn State's newly marred reputation.

The ensuing fallout from the scandal has cost coaching legend Joe Paterno and longtime president Graham Spanier their jobs.

Athletic Director Tim Curley has been placed on administrative leave, and Vice President Gary Schultz, who was in charge of the university's police department, has retired. Both are charged with lying to the investigating grand jury and failure to report to police. They maintain their innocence, as does Sandusky.

In addition to the ongoing criminal investigation, Penn State and the NCAA have started their own reviews and the U.S. Department of Education is examining whether Penn State violated federal law by failing to report incidents of sexual abuse on campus.

"We've never seen anything like this," said Brian Swallow, vice president of business development at Fanatics LLC, a privately held seller of licensed sports merchandise. "This is unique; there's nothing we can compare it to."

The Jacksonville, Fla.-based company does not provide sales figures but Swallow said the company's Penn State sales have dropped 40 percent since the scandal broke, compared with the same period last year.

Just as no two scandals are alike, fan response varies from case to case.

Swallow said sales of Ohio State merchandise fell last year in the wake of an NCAA investigation into football players accepting cash and discounted or free tattoos in exchange for Buckeyes memorabilia such as jerseys and championship rings. The scandal cost coach Jim Tressel his job and led to several players' suspensions.

There was a drop and rebound for Ohio State merchandise sales, Swallow said, "but the Penn State drop-off is double that of anything we've ever seen."

"This is a large story and an unfortunate one. It really hits home for a lot of people," Swallow said. "It's one thing to have a kid sign a jersey and get paid for it; this is obviously something very different."

Powell said the only scandal he has seen come close to what's happening at Penn State is the furor surrounding Michael Vick's return to the NFL after serving 18 months in federal prison for dogfighting.

"There was a very visceral response," he said. "There are some people who will never forgive what he did but in many ways he has recovered from the scandal."

A sporting goods store in the heart of State College said sales of Paterno-specific merchandise are up.

"I'm not sure it relates to the situation or if people don't know how long those items will be available," said Caroline Gummo, advertising manager of The Family Clothesline shop. Also selling briskly is a new Penn State T-shirt that features a football helmet with a blue ribbon representing child abuse prevention, she said.

Five dollars from the sale of each shirt will be donated to the Let Go, Let Peace Come In Foundation, a Pennsylvania-based nonprofit that helps adult victims of childhood sexual abuse and is working with the attorney for several men who said they were victimized by Sandusky.

"Those have been a great success. We have seen people coming into the store specifically for those T-shirts," she said.

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